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What is the Personal Property Securities Act?

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The Personal Property Securities Act (PPSA) has been around now for over 15 years. 

As the name suggests it regulates security taken over personal property.  Personal property means any chattels, livestock, shares, and most types of other physical goods.  Importantly it does not include land.  Security in this context means using the personal property as security for borrowing money.

Most people are familiar with mortgages of land.  The PPSA effectively allows someone to take a “mortgage” over personal property.  Say, for instance, you owned a valuable stallion and needed to borrow some money.  You could go to a lender and offer the stallion as security for the loan.  The lender could then take a security agreement over the stallion.  If you defaulted in the loan then the lender could sell the stallion and recover the debt.

The main uses of the PPSA are for:

a) Banks lending to business where the bank takes a “general security agreement” over all the personal property of the business.  Under a general security agreement the bank can appoint a receiver to the business;

b) Trade credit where a business that sells goods to another business on credit (for instance, the buyer can pay on the 20th of the month following purchase).  In these circumstances the seller of the goods can retain a “security interest” in the goods that are sold.  This means that if the buyer doesn’t pay for the goods the seller can recover them;

c) Hire purchase arrangements where the buyer of goods has possession of the goods and pays them off over time.

If you are buying a house you should consider checking the Personal Property Securities Register to see whether the seller has given a security interest over any of the chattels to any third party.  Any such security interest would need to be released (in the same way that the mortgage over the property is released).  Registration on the Personal Property Securities Register is a relatively straight forward process and most people do it themselves.  It is an online system.  For more details see ppsr.govt.nz

As with all legislation there are pitfalls and issues that are complex.  If you have any questions regarding PPSR you should make contact with one of our experienced lawyers.